How does India look to the Western investor? A series of anti-business decisions have led to many influential India fans abroad wondering whether the problem is short-term weak political leadership or something more long-lasting and disturbing.

The ministry of tourism may not have changed the travel slogan from Incredible India to Impossible India just yet, but to some global investors it certainly seems things are headed that way.

After more than two decades in which the government has worked to build credibility with global investors, a series of recent steps have baffled foreigners and suggested to some that the government is not so sure it wants foreign investment after all.

Such moves as the government's proposal to tax certain types of transactions retrospectively, the recent decision to vacate 2G licences, the compulsory licensing of a cancer drug to a generic producer, the surprise closure of cotton exports, and the flip-flopping on the multi-brand retail rule could harm India's credibility for years, some observers say.

"A lot of the steps the government has taken over the past six months have caused considerable concern for foreign investors," says Vikramaditya Khanna, a professor of law at the University of Michigan, and an expert on Indian law, US corporate and securities law.

Of particular concern is the Vodafone controversy. In 2008, the government wanted to collect tax on the $11 billion-plus 2007 sale by Hutchison International of Hong Kong of its 67% share of a Mauritius-based company that owned Indian telecom company Hutch Essar to British Vodafone.

The government claimed that Vodafone owed $4.4 billion in taxes and penalties. In January, the Supreme Court denied it had the power, which the government now asserts once more in its current bill - and even claims the right to assess taxes on deals all the way back to 1962.

In an open letter to Prime MinisterManmohan Singh released March 29, a consortium of international business organisations representing 250,000 companies said that several government tax decisions over the past two years have already led some of their members to reconsider their Indian investment plans - and that if passed, the 2012 bill could have an even more profound effect.

"The sudden and unprecedented move in the Bill has undermined confidence in the policies of the Government of India toward foreign investment and taxation and has called into question the very rule of law, due process, and fair treatment in India," wrote the group, which included Confederation of British Industry and the United States Council for International Business.

"...Together, these proposals make it impossible for companies to predict the costs and risks of doing business in India or to have confidence that their results in past years will stand."

Of course, the scale of opportunity will keep some people knocking - no global business can turn its back entirely on 1/7th of humanity - but at the margin, some observers say the loss of trust could have a profound effect on investment. And not just foreign investment in India:

Khanna argues that the recent rise in outward-bound mergers and acquisitions suggests that Indian companies are also increasingly viewing other markets as a safer bet than their own neighbourhood.

For the India Inc brand, the collective fallout from the government's decisions could be quite negative - particularly if the overarching rationale remains unarticulated and investors are left to guess the government's future intentions.

GIVE US CERTAINTY

More than almost anything, business hates uncertainty. "They can deal with insecurity, and even violence to a certain degree," says Simon Anholt, a London-based consultant who has advised more than 40 governments about image and reputation.

"Plenty of companies are investing in Afghanistan and northern Mexico - they just factor it in, it just means an additional security cost. The thing that no company can insure against and that absolutely terrifies the pants off them is political instability."

Before almost anything else, investors need to be assured that their investment is safe, according to Hartmut Schwesinger, president and CEO of FrankfurtRheinMain, a development agency that tries to attract business to Frankfurt, Germany. "They want assurance that the legal framework that they are working in and working with is sound and resilient, that they know the conditions they will work under and can be sure that things are stable," he adds.

Decisions such as the Bayer compulsory licence call that assurance into question, Schwesinger says. The licence, the first such demanded by India, is being seen by proponents as a way to strike a balance between recognising no intellectual property rights for drugs and recognising patents that allow patent holders to pay any amount they like for their drugs.